Q&A Forum

QuickBooks -- how do I set up subsidiary company in Quickbooks?

I've seen recommendations to use the Class field on all transactions, but unsure how that would work with intercompany transactions and eliminations. Does anyone have experience with subsidiary companies within QB with billing back and forth between the parent and the sub?/p>

Answers

Anonymous

(Agent, JKS Solutions, Inc.)
| Oct 21, 2012

Quickbooks is not designed to handle multiple entities. The class feature can be implemented but is problematic. The class feature should be thought of as a way to divide a single company into many divisions, there is no "roll up" feature that would allow proper "investment in" accounts for investments in other entities.

A solution might be to set up accounting for all entities in separate companies and then post the increase or decrease in investment via journal entry at the end of the month.

There is no intercompany feature in any version of Quickbooks. And there is no plan currently to develop this functionality. This is one of the many limitations of Quickbooks.

If you really don't want to use separate QuickBooks files, the relatively new Balance Sheet by Class feature can now be used to deal with subsidiaries, including intercompany transactions. Be careful, though, because in certain cases journal entries may need to be used instead of traditional data entry screens in order to get the class correct on the balance sheet.

That being said, my own company has a subsidiary and I use 2 separate files. Now that one can have 2 separate files open at the same time, it's quite easy to manage, and I only need to consolidate once a year for tax purposes since the subsidiary is a disregarded entity.

Jaime how it is possible to filter B/S and Trial, P/L? I used class but it is not showing some balance items effect in customize report by class i.e Accounts payable?
I used class feature for Projects, I want to operate five projects under one company, is it possible to have customized report for each project?

As with the other respondents, QB doesn't really do this. I inherited a company where the prior Finance lead tried this, and it took months of effort and many $Ks to unravel it. If something goes wrong you need to re-code the entire thing, transaction by transaction.

My understanding is that at the core, the problem is the proprietary Intuit database. It is effective in preventing people from migrating to other accounting systems (it is possible, but tends to be "lossy"). Just guessing here, their database has never been updated to have primary keys for Entity; it still isn't a supported concept.

QB is great for small businesses. However, once you cross borders or have very different LOBs, invested subsidiaries, etc, you really need to move off of QB.

Note this isn't a QB-specific criticism. In point of fact, while this weakness is real, it feels less of a problem than some other packages where it is more difficult to have two entities open at once (think Xero.com). So, per Jaime, two company files actually works reasonably well.

Seriously, though. Using Class for this purpose will cause problems. Big ones.

The only thing classes are good for are for Credit Cards that multiple employees use. I would stick with keeping the companies separate in QB and then downloading Profit and Loss, Budget and Balance Sheets to consolidate both companies...unless you decide to purchase the expensive QB Enterprise edition. As far as journal entries go, use the customer invoice method / receive payments that way. Journal entries work great but only in a combined QB Enterprise edition.

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